How are Capital Losses on Municipal Bonds Treated?

Forum|Forum|6 years ago
May 31, 2019
1 reply
0 views

I have a Municipal Bond which I purchased at a premium mature. How are Capital Gains on Municipal Bonds treated for Tax purposes?

Best answer by TomYoung

Capital gains and losses on Muni bonds are treated exactly like capital gains and losses on any other securities.

-----------------------------------------------------------------------

Capital Gains and Losses

Even though the interest paid on a municipal bond is tax-exempt, a holder can recognize gain or loss that is subject to federal income tax on the sale of such a bond, just as in the case of a taxable bond. The amount of gain or loss is equal to the difference between

the sale price of the bond and
the holder's tax basis in the bond (the amount the holder paid for the bond originally, including any additions to such basis, such as OID as discussed in the following section).

- See more at: http://www.investinginbonds.com/learnmore.asp?catid=8&subcatid=60#sthash.4yZ3tdc7.dpuf

-----------------------------------------------------------------------

Tom Young

TomYoungAnswer

Employee

Capital gains and losses on Muni bonds are treated exactly like capital gains and losses on any other securities.

-----------------------------------------------------------------------

Capital Gains and Losses

the sale price of the bond and
the holder's tax basis in the bond (the amount the holder paid for the bond originally, including any additions to such basis, such as OID as discussed in the following section).

- See more at: http://www.investinginbonds.com/learnmore.asp?catid=8&subcatid=60#sthash.4yZ3tdc7.dpuf

-----------------------------------------------------------------------

Tom Young

Matilda

Employee

I see this is from 2 years ago but I have a question so I will try to just comment here and see what happens. I have a muni bond that matured in 2011 and was redeemed in 2016. It did not pay interest over the life of the bond, just at maturity. The only form received was a 1099B. We did not receive any 1099-OID during the life of the bond, or at redemption.

So - we need to report tax exempt interest without receiving any 1099-OID on this bond ever. How do I do this? I will of course set the 1099B basis to the redemption value so have no gain from1099B I just think I need to report the interest income on the bond even though it is tax exempt.